What is the purpose of a currency overlay program?

The purpose of a currency overlay program is fundamentally about managing a portfolio's currency exposures more effectively through outsourcing. This approach allows institutional investors to handle foreign exchange risks without needing to develop and maintain in-house currency management strategies.

A currency overlay program focuses on mitigating the impact of currency fluctuations on investment returns, which is particularly vital for investors with significant international holdings. By employing professionals or external managers who specialize in currency management, investors can achieve targeted currency exposures, enhance overall portfolio performance, and manage risks associated with exchange rate movements more efficiently.

This strategy helps in aligning the currency management practices with the overall investment objectives, thus ensuring that currency decisions do not detract from the core investment strategy. Hence, the correct option correctly captures the essence of what a currency overlay program aims to achieve.